The Certification Hypothesis of Fairness Opinions for Acquiring Firms
Pierfrancesco La Mura
Marc Steffen Rapp
University of Marburg - School of Business & Economics; Marburg Centre for Institutional Economics (MACIE)
HHL Leipzig Graduate School of Management - Department of Finance
Handelshochschule Leipzig (HHL)
July 12, 2011
International Review of Law and Economics, Vol. 31, No. 4, pp. 240-248
HHL Research Paper Series in Corporate Governance No. 4
We study the certification role of fairness opinions in corporate transactions in a simple non-cooperative setting with asymmetric information and possibly misaligned managerial incentives, and discuss the effect of different regulatory scenarios. Specifically, we compare three settings: one in which no third-party fairness opinion is available, one in which the management is required to obtain a fairness opinion before any transaction, and one in which the management's decision to require a fairness opinion is voluntary. We compare shareholder value in each of the three scenarios and discuss implications for the optimal design of regulatory environments for fairness opinions.
Number of Pages in PDF File: 24
Keywords: Fairness opinion, acquisition, management incentives
JEL Classification: G34, G38, K20
Date posted: March 23, 2009 ; Last revised: May 24, 2012
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